Core Matters I Investment Returns: A 5-year perspective

In breve

“It is difficult to predict, especially the future.” It is hard enough to anticipate developments over the coming year; with volatility increasing by the square root of time, isn’t it foolish to try predicting the next five?

Highlights:

  • 2019 has seen huge inflows into Fixed Income (FI) funds and outflows from Equities. From a medium-term return perspective this makes no sense. The formidable demand for safe assets reflects cyclical and structural forces (e.g. ageing).
  • No matter the economic scenario, FI returns over the next five years are doomed. Government bonds and IG credit will struggle to deliver positive returns. Riskier credit should do better, yet will hardly beat inflation. Worse still, FI assets, especially in EUR, will barely offer cushion to portfolios in an alternative recession scenario.
  • Valuations in Equities are much less stretched than in FI. They will not repeat the performance of the past ten years, but are still likely to deliver mid-single digit returns over the next five years.
  • The positive tail-risk takes the form of an innovation and productivity shock boosting both real rates and profits. The negative financial tail risk includes a severe recession (unlikely) or a new form of populism tackling income inequality. The latter would likely support long-term stability but over five years would imply higher inflation and taxes.

Download the full publication below

Stormy for now, then brighter but volatile – 5-year returns forecasts
Picture

© Generali Investments, tutti i diritti riservati. Questo sito web è fornito da Generali Investments ed è considerato come una comunicazione di marketing e una promozione finanziaria riferita ai prodotti e servizi delle società elencate di seguito, appartenenti al Gruppo Generali: Generali Investments Partners S.p.A. Società di gestione del risparmio, Generali Insurance Asset Management S.p.A. Società di gestione del risparmio, Generali Investments Luxembourg S.A. e Generali Investments Holding S.p.A. (nel prosieguo, congiuntamente indicate come Generali Investments). Inoltre, il sito può contenere comunicazioni di marketing e promozioni finanziarie di prodotti e servizi di società appartenenti alla piattaforma coordinata da Generali Investments Partners S.p.A. Società di gestione del risparmio, nello specifico di Generali Global Infrastructure, Sycomore Asset Management, Aperture Investors LLC., Plenisfer Investments SGR, Lumyna Investments e Generali Real Estate S.p.A. Società di Gestione del Risparmio